The recent leak of 11.5 million documents from Panamanian-based law firm Mossack Fonseca has sparked global outrage. And quite rightly so. 143 politicians from around the world, 12 of whom are current or former national leaders, were revealed to be evading the law and going to every length to avoid paying tax. Yet the British media and political storm that has erupted since the leak has distracted us from the fundamental issue.
The files exposed by an anonymous hacker have thrown into the spotlight a backroom clique that is used to remaining in the dark, or perhaps sunbathing on the sunny beaches of the British Virgin Islands. Unsuspecting electorates worldwide have reacted with fury to the revelations that numerous individuals and companies are parking their money in offshore funds.
One individual named was Iceland Prime Minister Sigmundur Davíð Gunnlaugsson, who had failed to disclose the 50% share he had in Wintris Inc, set up in the British Virgin Islands to evade tax, before being elected an MP seven years ago. Mass protests in the Icelandic capital Reykjavik following the leak led to his resignation and the calling of fresh elections.
The British media were quick to react. But before long the questions veered away from the international scandal to the Prime Minister’s private life; David Cameron was forced to confirm that his late father Ian Cameron had owned an offshore fund that paid no tax in Britain.
And so began a week of hell for the Prime Minister, waking up to headlines the following day, such as “Cam’s panned for his dad’s Panama plan” in The Sun. As many political commentators have pointed out, if he had just published his tax returns in the first place instead of drawing the scandal out, his week may have been a lot calmer.
Above all else, the papers revealed to the world that current UK and worldwide government strategies to tackle tax evasion and tax avoidance are nothing short of complete failure. Yet even with that shocking revelation, our media felt it was in the wider public interest to take a scenic tour of tax affairs within the Cameron family tree.
Following media attention on Jimmy Carr’s tax arrangements in June 2012, Mr Cameron called tax avoidance schemes “morally wrong”. He again voiced his “belief” in transparency a year later, announcing a G8 commitment for tax authorities across the world to automatically share information.
The G8 summit’s commitments were only reiterated in Thursday’s deal between Chancellor George Osborne and his counterparts in France, Germany, Italy and Spain, pledging “hammer blow” regulations to ensure the automatic flow of information about the real owners of overseas trusts. The Panama Papers show that policies to ensure the public sharing of information have far too many loopholes.
Oh, and do you remember the petty £130m tax deal that Google settled with the UK in January following decades of tax avoidance? Despite it being a rate of around 3%, Osborne hailed it a “victory”. I doubt this was the type of achievement Mr Cameron had in mind when he spoke passionately in June 2013 on the subject, exclaiming: “when some businesses don’t pay their taxes, it corrodes public trust.”
Quite frankly, there appears to be a significant gap between David Cameron’s virtuous words and his actions. The Prime Minister has repeatedly evaded intervention in the British Virgin Islands, allowing it to continue as an offshore tax haven.
But it’s not only our media that are stumbling around the government’s failed policies to address tax evasion. The Labour party also appears to be treating them as a trivial matter, preferring to play political football with the Prime Minister about his personal tax affairs.
In the first Prime Minister’s Questions since the leak, David Cameron gagged that Corbyn’s tax return is “rather like a metaphor for Labour policy – late, chaotic, inaccurate and uncounted”. 1-0.
“I’ve paid more tax than some of the businesses owned by people he might know quite well” shot back Corbyn, to rapturous laughter. 1-1.
“I’m afraid his figures, rather like his tax return, are inaccurate”, returned David Cameron, to an entertained “Ahhhhh” from his benches. 2-1. And so it went on…
Ultimately, the biggest data leak to journalists in history has drawn public attention to a far wider issue than just the dirty work of a few wealthy individuals. The Panama Papers have shown that government policy to prevent and prosecute those who illegally dodge tax regulations is unfit for purpose.
Crucially, though, the way that Britain’s media and politicians have responded shows that journalists and opposition MPs need to be holding the government to account for failed policies, and the government needs to start tackling tax avoidance and evasion competently, flexibly and transparently.
By Ewan Somerville | @ewansomerville